USTR Tai says any metals tariff deal with EU must address global excess capacity

By David Lawder

WASHINGTON (Reuters) -U.S. Trade Representative Katherine Tai said she is working hard to resolve a dispute with the European Union over U.S. steel and aluminum tariffs and EU retaliation, but any solution will need to address the problem of global excess production capacity for the metals, largely in China.

Tai, speaking to a U.S. Senate Appropriations subcommittee, said the "Section 232" tariffs imposed by former president Donald Trump have had a positive impact on U.S. steel production but have had costs in terms of retaliatory tariffs.

"Solutions that we come to with our trading partners, I believe in my core, really have to address the larger issue around the overcapacity in the market," Tai said.

At a budget hearing where Tai provided a broad range of updates on Biden administration trade plans, including a review of China trade policy, Tai said she is mindful of the EU's planned doubling of the EU's retaliatory tariffs on American whiskey, Harley-Davidson (NYSE:HOG) motorcycles and power boats on June 1.

But she gave no indication that the Biden administration is ready to remove the national security tariffs that were intended to strengthen U.S. steel and aluminum production to spare those targeted industries targeted by the EU.

Several times she deflected questions about the tariffs to discuss the need for both the United States and the European Union to join forces to address Chinese excess capacity.

"What I am hoping is that they see that problem, and they see it to be as serious a challenge to their ability to produce and compete in steelmaking as we see it, and working together we will be able to resolve these sets of tariffs so that we can join forces on the bigger picture."

Tai also said that her agency was conducting a top-to-bottom review of China trade policy, including all "Section 301" tariffs imposed on some $370 billions of imports from China and exclusions granted on some products.

She said she would work to hold Beijing to the commitments made under Trump's "Phase 1" trade deal with China, including pledges to buy more U.S. seafood and other products and commitments to make intellectual property and agricultural regulatory changes and open up its financial sector.

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But no high-level meeting with senior Chinese officials has yet been scheduled, she said, despite the agreement's call for semi-annual minister-level consultations.

Tai said that senior officials from the United States, Mexico and Canada would convene in coming weeks under the provisions of the new North American trade agreement to discuss issues. She said she is "not afraid" to use the enforcement provisions in the U.S.-Mexico-Canada Agreement, which was launched last year.